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Property transfer tax - basics and innovations from 2021

22.12.2020

Property transfer tax (overdrachtsbelasting, Dutch transfer tax) is faced by almost every resident of the Netherlands. We will tell you how it works and what important changes to it come into force on January 1, 2021.

 

When is property transfer tax paid?

You pay overdrachtsbelasting when you become the owner of real estate assets. The most common situation is the purchase of real estate (house, land, as well as commercial premises). By the same logic, the acquisition of shares in companies (BV or NV) whose assets consist of real estate is taxed. The transfer of not the real estate itself, but the rights to it, such as the right to build and the right to lease, is also subject to taxation. In this situation, you acquire for a certain amount the right to use someone else's real estate for your own purposes - for example, to build a house. If you are in doubt as to whether your purchase is eligible for transfer tax, contact your tax advisor (Nalog.nl).

 

When are you entitled to not pay tax?

You do not need to pay property transfer tax mainly in cases where you become the owner not as a result of a market transaction: for example, when you get married or a registered partnership on the basis of common ownership, or, conversely, divide the property as a result of a divorce. The same applies to inheritance and division of property between heirs.

In some cases, tax exemption is applicable due to the specifics of the transaction - for example, when making a contribution to a partnership, mergers and acquisitions within a group, when buying agricultural land, etc. These situations require individual analysis.

Tax payment procedure

As a rule, a transaction subject to property transfer taxation is carried out through a notary. In this case, he does everything for you. The notary determines whether and how much tax you have to pay, whether you qualify for any exemption or exemption. As a result, he files the tax return for you and withholds tax on your behalf.

If the title deed is not issued, you must file a declaration and pay the property transfer tax yourself within 1 month after becoming the owner. You can ask us for advice and help. Please note that the person transferring title to you must report this to the tax authorities within 2 weeks.

 

The tax rate

As of 2020, the rate of the property transfer tax (overdrachtsbelasting, Dutch transfer tax) is:

  • 2% for residential buildings and related objects such as a garage, barn or garden house.
  • 6% on all other real estate, such as commercial premises.

Please note the following changes in taxation from 2021.

 

Tax increase on the purchase of investment properties from 2021

From 2021, new tax rates will come into force on the purchase of commercial real estate and houses that are not intended for personal use:

  • When buying a commercial space for your own use in 2021, you will pay 8% of the transaction amount. Previously, the tax was 6%.
  • When buying for investment purposes - both residential and commercial real estate not for personal use, but for example, for renting or even for children - from 2021 you will also pay 8% tax. Even if the property will not be used commercially, but will not be your place of residence, an 8% tax will apply. It used to be 2% for houses and 6% for other properties.

Thus, the largest changes have affected the residential investment real estate sector. Buying houses for rent in 2021 will rise in price by 4 times in terms of a one-time transfer tax. Perhaps this is the reason for the achievement of the next peak in real estate prices, which is now being recorded despite the situation and the risks caused by covid-19.

 

Tax exemption for home buyers under 35 from 2021

The good news is the incentive introduced for young players in the housing market. The cabinet improves youth access to this market. From 2021, home buyers under the age of 35 (i.e. up to 34 years old) who buy a home for personal use will be exempt from property transfer tax. This will save them 2% of the purchase price, i.e. buying a home worth 300.000 euros will be 6.000 euros cheaper for them. From April 1, 2021, an additional condition will come into force: the purchased object cannot cost more than 400.000 euros, which is positioned sufficient for starters.

Anyone who wants to take advantage of the exemption must use the new home as their primary residence. This means that the buyer not only registers with the municipality at the address of the house, but actually builds a center of vital interests around it (school, childcare, sporting events, friends, family). Only one house can be used for such purposes.

The exemption applies to the transfer of the home from January 1, 2021. The moment of registration of the title deed is decisive, and not the moment of signing the sales contract.

The exemption applies to each buyer individually. If one of the purchasing spouses (or partners) is 35 years old and the other is 34, the older spouse will pay 2% tax on his share, and the younger spouse will qualify for the youth exemption (if he also meets additional conditions).

In total, the buyer must meet a number of conditions to benefit from the transfer tax exemption:

  • Buyer's age: adult, under 35 years old (up to 34 years old inclusive).
  • The buyer purchases a home (not a commercial property).
  • The buyer has not previously received a transfer tax exemption.
  • The buyer will personally reside in the house.
  • The value of the house does not exceed € 400.000 if the purchase is made after March 31, 2021 (before this date, this house value limit does not apply).

 

Conclusions

In this article, we figured out in which cases a resident of the Netherlands is faced with a property transfer tax (overdrachtsbelasting, Dutch transfer tax) and discussed the main trends in the development of this taxation.

Since 2021, the state has increased the one-time tax payment for real estate transactions with an investment context up to 4 times, while trying to alleviate the tax burden for young people by drawing a line between youth and maturity at the age of 35. Hurry up to take advantage of the benefits and do not forget to include the new tax burden in your business plans. Nalog.nl specialists will be happy to assist you with tax advice on personal and business matters.

 

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